Social Security and Welfare Reform

70 years on, we've never been further away from Beveridge?

Published: Nov 28, 2012

Author: Peter Kenway

Category: Social Security and Welfare Reform

For those people celebrating the 70th anniversary of his report this week, the reality is that we have never been further away from Beveridge than we are now. Another graph from this week’s poverty report for JRF shows this well.

Beveridge championed the principle of ‘benefit in return for contribution’. The benefits built on this principle are the national insurance ones, namely the state retirement pension, ‘contributory’ jobseeker’s allowance (unemployment benefit) and contributory employment and support allowance (incapacity benefit).

Even at the start, the system was never purely contributory. The requirement to provide support for people who had not contributed introduced a second, means-tested ‘national assistance’ element. Eleanor Rathbone’s family allowances, given for the second and subsequent child in the family, introduced a third, universalist principle.

We can measure Beveridge’s weight within the benefit and tax credit system by the share of spending which goes on contributory benefits. The graph below, drawn from the report, shows spending on all forms of benefits and tax credits, as a share of GDP, back to the start of the welfare state.

The first point about this graph is that at a shade over 13% of GDP in 2011/12, total spending on benefits is at an all-time high. Prior to the big recession, this proportion stood at around 11%, pretty much equal to post-1980 average. Whether this was really OK after 15 years of uninterrupted economic growth is a legitimate question; but it is not the point here.

The Beveridge ‘content’ within this spending is measured by the bottom two slices of each bar. The bottom slice shows spending on the state retirement pension. Slice two shows spending on working-age contributory benefits. Taken together, these bottom two slices represented 5.6% of GDP in 2011/12.

The other two slices approximate to the non-Beveridge content. Slice three shows means-tested benefits and tax credits. Slice four, the top slice, shows other benefits chiefly needs-based ones (e.g. for disability) and universal, age-based ones (e.g. child benefit and the winter fuel payment) and universal ones (e.g. child benefit).

So the key point is this: the 5.6% Beveridge share in 2011/12 represents just 42% of the total spending on benefits. This is the lowest share since the welfare state began in 1948.

Once upon a time, things looked very different. Although always a hybrid, the system was dominated by contributory benefits until the early 1990s recession. At their high point, between the mid 60s and mid 70s, contributory benefits accounted for more than 70% of the total. Since then, that is for more than 35 years, Beveridge has been in retreat.

Three points follow from this. First, by all means celebrate the 70th anniversary but do not imagine that what we have today is anywhere near a Beveridge system.

Second – the reverse point –do not dismiss the present system as some fossilised relic of the late 1940s but recognise that it is the result of frequent and often deep change over several decades.

Third, in making these changes, governments of right and left have repeatedly favoured non-contributory benefits over contributory ones. Swimming against so strong a tide, how useful can ‘back to Beveridge’ really be?